New FDI Ruling in UAE Encourages New Industry & Foreign Investment

New FDI Ruling in UAE Encourages New Industry & Foreign Investment

FDI Law in UAE

The recently introduced Foreign Direct Investment Law (Federal Law 19 of 2018) is an epoch making event in UAE’s economic history. As per the new law, foreign shareholders can now have upto 100% ownership of companies in specified sectors.  The FDI law provides for a positive list and a negative list which is nothing but the sectors in which 100% FDI is allowed and sectors in which they are not. As per the law, the UAE cabinet is to form a FDI committee which will suggest the sectors to be included in the ‘positive list’.  The final decision on the sectors in the ‘positive list’ will be left to the UAE cabinet.  A broad outline or principles has been given for the Foreign Direct Investment committee to determine the sectors under positive list.

(i) To be in alignment with the overall plans of UAE;

(ii) Value addition to UAE economy;

(iii) Technology innovation and job opportunities and training for UAE Nationals;

(iv)The overall expertise, repute and competency of the FDI firm;

(v) Modern technology implementation and

(vi)Any other requirement and conditions as may be imposed by the UAE cabinet from time to time

The level of such ownership can be fixed at any level, either 100 percent or any lesser percentage.  Conditions may also be imposed on the minimum capital requirement, the form of entity and Emirati (employment on board) requirement etc.

Not-permitted sectors (The negative list)

Article 7 of the FDI law specifies the negative list in which higher levels of FDI is not permitted.  These are:

(i) Petroleum products exploration and production;

(ii) Fishing;

(iii) Security, Military, Arms and Weapons and uniformed services and equipments etc;

(iv) Post & Telecom;

(v) Banking and Financial services;

(vi) Transportation (Land & Air);

(vii) Insurance;

(vii) Hajj & Umrah services and services such as publishing, labour, recruitment, pharmaceutical, blood banks, quarantines, electricity and water supply etc.

The cabinet has the right to add or remove any sector from the above list.

Article 10 lists the procedure to apply for increased FDI ownership.  The application should be processed within 5 working days by the competent authority.  License shall be issued by the Economic Department of the Emirate concerned, while rejected applications have an appeal process defined.  Detailed procedures for registration, renewals etc. are being issued separately.

For sectors that are neither on the positive list nor on the negative list, applications can still be submitted for higher FDI.  A new FDI Unit will be created under the Ministry of Economy.  The FDI unit shall recommend the FDI policies to the Government and establish a comprehensive database of FDI projects in UAE and monitor their performance too.

The new FDI law is a path breaking event in the annals of UAE’s economy.  Though at present there is no clarity on the exact sectors under ‘positive list’, the UAE cabinet has been given the powers to issue directions on this.  The cabinet may accordingly permit a ownership of less than 100%, place restrictions on the type of entity, specify minimum capital investment, allow greater FDI ownership in specific Emirates and so on.  We, at Al Nassar, advocates in Dubai are constantly monitoring each and every development in the sector and undertake a careful review of every Act, Article and law made in this regard.  Whether you are a MNC looking to improve your UAE presence, or a local business wanting to know how the new law will affect the future of UAE’s economy, you can contact Al Nassar Advocates for more clarity and information on the issue.